Outlook Report - Supply Chain Management 2020 and Beyond

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Foreword
Welcome to Outlook 2020 & beyond. This is the third report of four and gives a view
of the different Supply Chain Management concepts.
Every report starts with a summary and/or a general outlook. By just reading this, you
will get a good overview. If you want to read more I have numbered some additional
sectors which will give you a more detailed picture of the future. For the Supply Chain
Management report I have almost included every sector.
Overview of the reports:
1 Global perspective
2 Infrastructure
3 Supply Chain
4 Volvo Group Logistics and Volvo Logistics
Ingrid Lundberg
Manager Corporate Outlook & Public Affairs
Volvo Logistics Corporation
October 2011
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Abbreviations
SMED Single Minute Exchange of Dies
JIT Just In Time
OEM Original Equipment Manufacturer
2PL Second-Party Logistics Provider
3PL Third-Party Logistics Provider
4PL Fourth-Party Logistics Provider
SCM Supply Chain Management
LLP Lead Logistics Provider
M&A Mergers & Acquisitions
BRIC Brazil, Russia, India, China
T&L Transport & Logistics
RFID Radio Frequency Identification
ERP Enterprise Resource Planning
CPFR Collaborate Planning Forecast and Replenishment
EFT Electronic Fund Transfer
ITS Intelligent Transport Systems
EURIDICE EURopean Inter-Disciplinary research on Intelligent Cargo for
Efficient, safe and environment-friendly logistics
ICT Information and Communication Technology
EcNod EURIDICE Compliant Node
QR (code) Quick Response code
OECD Organization for Economic Co-operation and Development
SESAR Single European Sky ATM Research
RDE Rapidly Developing Economies
FSI Forskningsgruppen fr Samhlls och Informationsstudier)
R&D Research & Development
TCO Total Cost of Ownership
capex capital expenditures
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Table of contents:
3.1 Vehicle Manufacturers Logistics Concepts ......................... 6
3.1.1 Executive summary....................................................... 6
3.1.2 Logistics Concepts ........................................................ 6
3.1.3 Future challenges ......................................................... 9
3.2 Logistic Providers Business Concepts ............................... 13
3.2.1 Executive summary..................................................... 13
3.2.2 LLP ............................................................................. 14
3.2.3 Suppliers ..................................................................... 16
3.2.4 The future of the logistics provider .............................. 17
3.2.5 Mergers and acquisitions ............................................ 19
3.2.6 Global vs. Local .......................................................... 20
3.3 Logistic Information Solutions ............................................ 23
3.3.2 Information Solutions .................................................. 24
3.3.3 Future challenges ....................................................... 26
3.4 Packaging .......................................................................... 35
3.4.1 General ....................................................................... 35
3.4.2 The future ................................................................... 36
3.5 Capacity and Utilisation...................................................... 38
3.5.2 General ....................................................................... 38
3.6 Competence and culture .................................................... 45
3.6.2 Competence ............................................................... 45
3.6.3 Culture ........................................................................ 51
3.7 Scenario planning .............................................................. 53
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3.1 Vehicle Manufacturers
Logistics Concepts
3.1.1 Executive summary
The concept of logistics has changed greatly over the years and so OEMs constantly
have to re-evaluate and re-develop their logistics concept.
Kaizen, Kanban, JIT, SMED and Lean are powerful words among companies in the
manufacturing business today and the Lean manufacturing concept will still be
central to OEMs in the future.
To become more customer-oriented OEMs have some time ago begun shifting from
a supply chain point of view to a demand chain one. OEMs will continue to focus on
demand chain management in order to mitigate the otherwise potential bullwhip
effects that may occur in a supply chain. This will over time reduce the working
capital at a given time in comparison. However, they will be facing substantial costs
in order to redesign the IT systems from the previously popular push to pull.
A trend among OEMs is to diversify sourcing in order to not put all eggs in the same
basket in case of unforeseen events affecting their supply chain. We also see a trend
among the suppliers to situate themselves in close vicinity to OEMs.
Process orientation will continue to be important for the coming years. Since the
market is clearly transitioning from push to pull the importance of being able to
streamline the organisation is becoming increasingly important.
To summarize, the vehicle manufacturing industry will be far more complex than
today and there are five challenges that the automotive industry see as their greatest
in the coming years:
Supply chain visibility

Cost containment
Risk management
Increasing customer demands
Globalisation
3.1.2 Logistics concepts

As the cost of production decreases, its inevitable that the cost for logistics gain in
share as part of the total cost for the product. A companys logistics function has
therefore been placed under the microscope and bumped up the agenda at the
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same pace as production costs have been reduced over the past decade or so. This
is true for most companies and most definitely for vehicle manufacturers. From
rationalising logistics in assembly plants to better sourcing and distribution to the
market, the realisation by OEMs that efficient logistics are fundamental has grown.
The concept of logistics has changed greatly over the years and so OEMs constantly
have to re-evaluate and re-develop their logistics concept.
Kaizen, Kanban, JIT, SMED and Lean. They are all powerful words among
companies in the manufacturing business today. Projects are being undertaken and
money is invested in order for companies to be able to put these stamps of
efficiency/quality beside their logotype. However, the reality is often that these words
do not make it past the project phase and therefore never become a philosophy or
way of doing things on a company level.
Lean
Just as many balanced scorecards met their death in the nineties due to the lack of
implementation, many Lean manufacturing concepts/attempts risk meeting the
same fate.
The Lean manufacturing concept was introduced by Toyota by applying the Toyota
Production System (TPS). Key principles of this concept are Muda (Wasteful/non
value-adding), Genchi Genbutsu (go and see (to fully understand)), Kanban
(signboard) and Kaizen (improvement). The Lean manufacturing concept will be
given a significantly higher focus over the next few years and therefore being central
to OEMs in the future. Many have failed to introduce the concept as it has been
treated as a project instead of being fully implemented and becoming a continuous
process.
From the Lean perspective, within logistics in specific, focus is stressed on The
seven deadly wastes of logistics;
Transportation/conveyance
Delay/waiting time
Accuracy of motion/movements
Space (ex. sqm)
Errors
Overproduction
Inventory (accuracy, cost, cash-flow)
Build-to-Order / Order-to-Delivery / Demand Chain Management

To become more customer-oriented OEMs have some time ago begun shifting from
a supply chain point of view to a demand chain one. Demand chain management
implies changing ones focal point from downstream (original supplier) to upstream
(end customer), working backward through the entire chain, to the suppliers of the
supplier. Hence, everything that is moved, handled or produced should ideally be in
response to a known customer requirement.
One take on demand chain management is the pull concept of the Build-to-order
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approach where a product is assembled first when ordered from downstream. This
means that no materials/parts are sent/ordered in advance, a sort of just-in-time way
of production. In practice, for an OEM, this means that the suppliers IT system pulls
information on customer specification from IT systems located in dealerships and
distributes it through the supply chain.
OEMs will continue to focus on demand chain management in order to mitigate the
otherwise potential bullwhip effects that may occur in a supply chain. This will over
time reduce the working capital at a given time in comparison. However, they will be
facing substantial costs in order to redesign the IT systems from the previously
popular push to pull (demand based/Built-to-order).
Suppliers
A trend among OEMs is to diversify sourcing in order to not put all eggs in the same
basket in case of unforeseen events affecting their supply chain. This requires a
logistics system of rather
high accuracy in order to
make ends meet.
Observed over the last
few years is a trend
among suppliers to
situate themselves in
close vicinity to OEMs.
This makes for more
precise deliveries with
the supplier near enough
to become an integrated
part of the production
process. An example of
companies with opposing
sourcing strategies is
Toyota (on the left) vs.
Ford (on the right) as depicted on the right. From the image, it can be observed that
Toyota has an extremely diversified sourcing strategy, which as regards of the
Toyota city outside Nagoya, implies an almost full integration of suppliers into the
production process. In Toyota city, the suppliers are situated close to the production
plant, thus enabling smaller volumes to be delivered with higher accuracy causing the
positive spill-over effect of Toyota not having to stock almost anything.
Mergers / Acquisitions
When combining decentralized organisations, you run the risk of losing the
advantages of a merger. For example, its not unusual to see HR working towards
one goal, while IT works towards another. Departments, business units and
integration efforts cannot be isolated. Newly merged companies that allow
themselves to operate in the same decentralized manner they followed before the
merger will have much of the same overhead and cost structure they had earlier.
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Process orientation
The trend in recent years has clearly leaned towards making companies more
process-oriented. Implementing processes for all activities help the company
streamline the organisation. This has proved to work in most situations and will hence
probably continue to be relevant. The important thing when working with processes is
to always strive for continuous improvement.
There are three aspects the company should focus on improving:
Quality The ability to satisfy the customers needs and expectations.

Efficiency How well the processes uses the organisations resources to
produce results. In other words increase productivity.
Flexibility To what extent the processes can adapt to changing conditions such
as fluctuations in demand.
Since the market is clearly transitioning from push to pull the importance of being
able to streamline the organisation is becoming increasingly important and will
probably continue to be so for the coming years.
The Best Practices
Best Practices in supply chain management can be rounded up in four bullet points:
Consistency on execution, enterprise resource planning (managing data and

processes at enterprise level).
Centralized technology and data, avoid disparate knowledge and islands of
technology.
Centralized business rules, avoid business diversity and promote centrally
managed best practices.
Global visibility, promotes interoperability and cost efficiency.
While Best Practices are methods tested in many different companies and have
proven to work it is not necessarily the best for your particular company. Due to the
fact that companies supply chains become ever more complicated and hence more
unique, one must be careful when implementing new practices from other
companies. As mentioned above, companies differ to a large extent when it comes to
their supply chain structure and sourcing. What works in one company does not
necessarily work in another. The key is to adapt the practices to the company.
3.1.3 Future Challenges

The challenges that Volvo Logistics are meeting in the coming years are much the
same as the challenges that exist in the supply chain of the automotive industry. By
looking at their ideas of the future it is possible to see what challenges is important to
meet for Volvo Logistics.
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There are five main challenges that the automotive industry see as their greatest in
the coming years:
Supply chain visibility

Cost containment
Risk management
Globalisation
Supply Chain visibility

Supply chain visibility concerns the information sharing between all parts of the
supply chain. To be able to get information about things such as inventory status,
demand and location of transports is of immense value. A more exact and constant
stream of such information would grant the supply chain a much higher efficiency
which can save both time and money. This would be what you could call an
intelligent supply chain.
To gain more visibility, the intelligent supply chain uses RFID tags, sensors and
smart devices to track and optimize the movement of materials from suppliers to
receiving docks and throughout assembly. However, it takes instrumentation even
further, using it to improve visibility downstream. For example, dealers might use
smart tags not only to locate specific automobiles across expansive lots but also to
ensure they install the right customisations on the right vehicles. The idea is mainly to
automate the supply chain to the extent that it can by itself refill inventory all the way
from supplier to end customer. Interesting to notice is that a majority of the
automotive supply chain managers do not distinguish that the most significant
barriers to visibility and collaboration are organisational, rather than technological.
The intelligent automotive supply chain recognizes the critical business need for
supply chain visibility. It sees visibility as the key building block for responding to
other top challenges, including cost containment, risk, customer and globalisation
issues.
Cost containment
Concerning cost containment it is hard to know where in the supply chain to cut
costs. One very viable solution to at least making costs a variable is to outsource the
supply chain to a larger extent than what is currently done. The only supply chain
function that is extensively outsourced by the majority of automotive executives is
transportation.Only one in five reports widespread outsourcing of customs/export
management and warehousing/distribution centres.
The intelligent automotive supply chain takes full advantage of increased

instrumentation and interconnectivity to reduce cost. Using these capabilities, it
maintains the optimum inventory of incoming materials, finished products, spare parts
and accessories spread across distribution centres and thousands of dealer repair
shops. Intelligent forecasting, inventory management and dynamic pricing of parts
are particularly important not just for efficiency, but because they position the
supply chain to capture the expected growth in the service segment as consumers
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hold onto their vehicles longer. These are ways to contain costs with a fully controlled
supply chain which can be more reachable when it is outsourced to a greater degree.
Risk management
Risk management is something that presently has a rather low priority in the
automotive supply chain. This is something that should be more emphasized since
the industry has been rather unstable the past years. Due to the increased
globalisation the risk concerning for example delivery and quality becomes more
pressing.
However with a supply chain that is more integrated all the way from producer to end
customer the risk will become smaller. This since a more integrated supply chain
would be more flexible and adaptable to changes in demand or supply at different
locations.
With vehicles staying in use longer, the demand for spare parts is growing, along with
it the incidence of counterfeit and grey market parts. It is a trend that threatens one of
the industrys most profitable segments. The smarter supply chain mitigates these
risks with smart tags that allow parts to be authenticated and traced throughout the
supply chain.
In addition, at any given time, more than 15 million containers are travelling through
international waters or waiting to clear customs. These deliveries face many risks:
delays, diversion and even physical damage. For traditional supply chains, cross-
continental transit typically means loss of visibility. But the smarter supply chain can
track its cargo containers anywhere in the world. Instrumented containers collect
information and report on their physical locations, environmental factors such as
temperature and humidity, as well as signs of tampering.

Increasing customer demands are something that has been growing in all industries
during the past years and will most likely continue in the same fashion. Growing
customer demands do not simply mean that they want more products; it is also a
matter of specifications and delivery. The automotive industry is, comparing to other
industries, above average concerning collaborating with the customer when working
with product innovation. This means that automotive supply chains excel at periodic
customer collaboration. On the other hand, they still fail when it comes to real time
interaction and collaboration. This results in a slower and less flexible supply chain.
To avoid the above, a more interconnected supply chain is the key. If the customers
can communicate their demands to all parts of the supply chain directly the flexibility
and response will vastly increase. For example, if a vehicle breaks down and with a
communication system can signal this to supplier and dealer directly, a lot of time and
money can be saved in comparison to sending technicians there to find the error. A
fully connected system could check availability of spare parts and, when in need,
order new ones. Such a system could also gather information about how the vehicle
is used and then relay this information to designers and engineers.
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Globalisation
The automotive industry is the most globalised industry in the world, second only to
the electronics industry. The greatest challenge with the globalisation is at present to
maintain reliability when it comes to both quality and delivery. The shortcomings in
these areas cancel out some of the benefits that can come from globalisation. The
automotive industrys top future concerns are more advanced business issues: the
regulatory and legal challenges of an international supply network and the
organisational and cultural obstacles posed by increasingly virtual relationships.
To avoid these problems the automotive supply chain should focus on integrating its
global supply chain. This includes integrating the product lifecycle management and
enterprise resource planning systems of all its partners. In addition, collaboration,
knowledge sharing and social networking tools help in closing distance gaps and
build people networks across the extended value chain.
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3.2 Logistic Providers Business
Concepts
The use of LLPs is predicted to increase in the vehicle industry since they can offer
more efficient supply chain solutions. Especially the use of 3PLs is expected to
evolve to long-term 3PL partnerships where logistics providers are so deeply
embedded in their customers business that the two companies basically work as one
entity.
Suppliers in the vehicle industry will focus more on increasing economies of scale
and developing common platforms and interchangeable production modules. These
can be used in several models and brands reducing cost and the need for adoption.
The main challenge lies in the evaluation of what part the OEMs should outsource
and the degree of risk.
The future of logistics providers will be shaped by longer transport distances,

intensifying competition and the development of new, innovative logistics concepts
through 2030. Two issues of special significance are increasing globalisation and the
growing demands of important customer sectors. Climate change and CO2 emissions
will continue to gain urgency and consumers are likely to make more sustainable
purchase decisions.
Strategic alliance and mergers/acquisitions (M&As) will be important to obtain

comprehensive and integrated supply chain solution capability. Looking at forecasts
for 2030, M&As are predicted to increase in emerging markets as a way of targeting
growth. Larger and better financially equipped logistic companies will look to highly
sustainable M&As.
The relative interest in Asian and Oceanias markets has grown significantly
compared with deals targeting entities in other regions. The number of cooperation
agreements or joint ventures is also likely to increase, some of which may eventually
lead to further M&As.
The global outsourcing is expected to remain an important element in 2030 but with
greater challenges. The auto industry will continue to source from low-cost countries
as manufacturers and suppliers continue to complement their commodities with more
complex products and services. The lowest price, however, is not everything
automakers and suppliers must look at the total cost of sourcing, including logistics,
quality of work, and management. This approach is referred to as best-cost-country
sourcing.
The vehicle logistics market is a complex and highly competitive market where a few
players handle the supply chain of the OEMs in the vehicle industry. Since the logistic
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providers conduct business in a competitive market, margins are low. Price is a less
efficient tool when it comes to attracting OEMs. Instead quality and delivery and the
right time with high credibility are becoming increasingly important.
3.2.2 LLP
Firms in the automotive industry have been quick to see the benefits in contracting
out to specialist companies who can take control of areas such as material flow
management, inventory control, container management, just-in-time delivery,
warehousing and transportation. Supply chain management is becoming more
complex and challenges regarding sourcing are a rising issue. The OEMs are
becoming more global and with the growth in emergent markets new supply chain
strategies need to be developed.
A typical car consists of some 12,000 parts that must be designed and manufactured
to be compatible and integrated in the final product. An elongated supply chain that
stretches from raw material supplier to parts supplier and final assembler
characterises the manufacturing of a vehicle. Since the supply chains in the vehicle
industry are so complex they are often in the forefront in development of new logistics
solutions. The rapid adoption of outsourcing has led many companies, where
shipping is vital to their businesses, to turn to third party logistics providers for
shipping support services, including warehousing, scheduling and distribution
services. The sectors of goods transport, supply chain management and other
logistics services have become heavily interrelated, creating further opportunities for
improved efficiency.
Logistic Providers concepts; 2PL 5PL
2 PL
This concept is based on traditional transportation and inventory control and is a
concept where the cooperation between the producer and buyer is in focus. The
logistic activities are handled by the part than can provide those functions most
efficiently.
3 PL
The concept of 3PLs stands for the involvement of three parties and can generally
be seen in a situation where two parties cooperate and involve a third actor that
handles selected function areas. This is something that in recent years has
become more common and is predicted to increase even in the future.
The 3PLs are mainly contracted to perform the logistic activities between the
producing and buying company and is often used in the case of:
Firms with a wide and/or complex distribution network.

Firms that do not focus on logistics as one of their core competences.
Can be useful when a company is in the creation of a new product group.
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In strategic discussion of more competence.
When a company is integrating activities of takeover.
3PLs allow companies to gain competitive advantage by:
Allowing firms to focus on developing their core competence.

Cost competiveness.
Freeing up resources raising/ensuring liquidity.
Benefit from the logistics know-how and international distribution networks of
specialised 3PL logistics providers, allowing for superior customer service.
Risks, limitations and disadvantage of 3PLs:
Loss of control over possibly critical logistic functions.

Increased distance from the customer and clients reducing the relationship
development.
Discontinuity of service of the logistics provider.
Differences of opinion or perception of the service level of the third party
provider.
Three theoretical approaches can be used to explain why companies outsource

and can serve as a framework to examine the different role a 3PL can assume in
a supply chain:
Transaction cost Firms outsource to 3PLs to minimise their transaction

cost.
Resource-based theory Firms outsource to 3PLs to increase access to a
wider range of resources.
Network Theory Firms outsource to 3PLs to take advantage of their third-
party logistics.
The role of the 3PL is predicted to evolve and become more integrated in the
future:
The next phase in the evolution of long-term 3PL partnerships is to have

logistics providers so deeply embedded in their customers business that the
two companies practically work as one entity.
Historically, 3PL engagements have been very tactical, but as companies
have progressed and focused more on their core competences, the skill sets
required of 3PL partners also have changed. The embedded concept has
grown out of the need for a more skilled and professional logistics
environment.
The increased volume and scope of services demanded from 3PLs have
given rise to their changing role, where today they are engaged in strategic
coordination of their customers supply chain activities.
Embedded relationships are marked by significant investments in facilities
and technology by 3PLs, by more transparency and sharing of information,
and by mutual commitments to each partners success.
The degree of outsourcing is expected to increase even more in the future
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due to more competition and costumers expectations where companies in
general will have to compete with both cost leadership and service
leadership.
An undeniable trend is that 3PLs have become brokers organising supply
chain networks. Through this process of organising networks, sharing
information, managing assets and reducing inventory, 3PLs facilitate SCM
best practises and becomes an orchestrator rather than merely a provider of
transport.
4PL
The concept of 4PL involves expanding responsibilities in every step in the supply
chain and involves more supply chain management. The concept can be
described as a supply chain integrator who assembles and manage the
resources, capabilities and technology to deliver a comprehensive supply chain
solution. 4PLs are often formed as a joint venture between a primary client and
one or more parties. 4PLs act as a single interface between the client and multiple
logistic service providers and all or major part of the clients supply chain is
outsourced to the 4PL.
5 PL
A relatively new concept is 5PL, which has evolved as a result of the higher
degree of information and technology involved in the supply chain management.
These providers can offer information solutions often in relation to e-business.
3.2.3 Suppliers
The manufacturing industry has developed towards function supplies where suppliers
focus on more modulation. Common platforms and parts are manufactured in a
higher degree since they can be used in several products independent on which
brand or company that will use the part. The strategy of contract suppliers is to
constantly evaluate to what extent the OEMs want to outsource the responsibility of
development, manufacture, and assembly of critical vehicle systems. A controversial
issue is outsourcing research and development. The manufacturing cost of modules
and systems is often as high for suppliers as OEMs. Outsourcing becomes worth
doing only if the supplier does much of the engineering work. This is particularly
relevant for complex systems or modules where the supplier can spread
development costs across several customers. This would tend to support the idea
that the biggest Tier-1s will get bigger still, their market position strengthened further
as they gain greater scale. Vehicle OEMs are varying in the degree to which they are
reducing supplier numbers and the extent to which they outsource R&D or
engineering work to major suppliers. Some are wary of the commercial clout this
strategy will ultimately put in the hands of suppliers in certain areas of the product or
sensitive about sharing in an area that is sensitive commercially and involves big
investments (like electric drive technologies). But the trend is for the larger suppliers
to get larger and become global providers of sub-systems to multiple OEMs.
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3.2.4 The future of the logistics provider
The future of logistics will be shaped by longer transport distances, intensifying
competition and the development of new, innovative logistics concepts. Two issues of
special significance are increasing globalisation and the growing demands of
important customer sectors. For instance, the automotive industry itself will set up
innovative supply chain structures and new manufacturing concepts, forcing logistics
companies to take action. For this reason, successful, innovative logistics companies
must be able to accept these developments or lead the way in order to gain valuable
competitive edges.
The logistics sector has been shaped in recent years by the spread of globalisation.
As a result of this development, the average length of transport distances has been
growing longer and longer. In addition, logistics companies have been forced to
follow customers who have employed offshoring strategies, relocating production to
far-off, low-wage countries.
As globalisation spreads and competitive pressure grows with it, companies will
also face demanding business-related requirements. They will have to avoid
empty runs, design schedules as efficiently as possible and minimise transhipping
frequency and times as well as personnel costs and damage to goods.
All operational planning must be optimised, inventories reduced and

administrative costs cut as much as possible. The needs of customers must
always be met in terms of on-time service, delivery reliability, degree of service,
low pricing, short order-processing times, flexibility, availability, capacity utilisation
and productivity.
The worlds Top 100 logistics companies are growing by an average of 3.7
percent a year, nearly twice that of the entire market, and are wedging out smaller
competitors. The development is creating a major challenge for small and mid-
sized companies. At the same time, such companies now have a good
opportunity to offer unique, complex and holistic logistics packages in submarkets
and niches.
More customers are recognising that to realize the full value of the potential trade-
offs from outsourcing, they need to broaden their span from purchasing many
piecemeal transportation and warehousing services, to fewer, bigger contracts
with much wider scope.
In response, the Logistics Provider industry has been evolving to offer greater
scope and more complex solutions.
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For the more demanding customer segments those seeking greater integration
and higher degrees of process conformance there is often a gap between buyer
needs and provider capabilities. Often, providers market and represent
capabilities that they have not yet implemented, so they over-promise and under-
deliver. The business model of most providers traps them because of their
inability to scale offerings, thus failing to generate returns which will allow them to
meet the expectations of high process conformance buyers.
For the more demanding customers, the provider model must be reinvented.
Providers increasingly must innovate to profitably serve as big a footprint as
possible across the large commodity segment and the growing, but more
demanding, high process conformance segments.
The future Logistics Provider industry will be more global, more concentrated,
more segmented around customer types and universally better at execution.
Business processes will be standardized and systems integrated. There will be
better visibility of end-to-end supply chain information, and integration with
partners and customers.
Logistics companies should bear in mind for the years to come that logistics
networks will change, sometimes dramatically, as their environments change.
Climate change and CO2 emissions will continue to gain urgency and consumers
are likely to make more sustainable purchase decisions. New ways of doing
business such as cooperation and bundling will help increase efficiency, and
completely new areas of operation. These developments offer new opportunities
for logistics companies that are informed about upcoming events and flexible
enough to adapt their businesses accordingly.
As customers seeking wider services the industry develops towards additional big
players. Lead Logistics Providers (LLPs) and recently one or two Big Brands,
have developed to serve the market. Big Brands are defined as very large global
logistics groups (greater than a 10 percent share of the customer segments which
they serve) with the capability to execute all of the activities within the confines of
their own organisation.
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The key buying criteria when evaluating logistic providers will be:
Greater reliability
Lower total costs
End-to-end integration and global visibility
Speed through more tightly engineered synchronisation
Flexibility
Consistent global capability
Industry specialisation
Optimisation and data warehousing
Deeper integration with buyers and partners.
There will be a battle among providers for the middle-ground of the more demanding
buyers who tactically outsource while continue to retain planning and control in-
house.
3.2.5 Mergers and acquisitions

Strategic alliances and mergers/acquisitions will be important to obtain
comprehensive and integrated supply chain solution capability.
Companies traditionally have pursued

deals to achieve extensions of product
and service offerings or expansion into
new geographies. Now talent is
becoming a chief reason for M&A
activity. Acquisitions are often made
specifically to expand the talent pool or
gain new capabilities securing an
innovative technology and the talent
behind it. With increased spending in
highly technical areas, companies are
often seeking professionals with very
specific skill sets.
The T&L industry has expanded in the

major markets as well as in the BRIC
countries Brazil, Russia, India, and
China and is seeking additional
growth in the booming emerging
markets of Vietnam, Indonesia, South
Africa, Turkey, and Argentina. Finding,
keeping, and motivating employees who
have the right skill sets has become a top corporate priority to sustain growth.
Looking at the figures above, shipping and logistic targets have become more
popular in the area of mergers and acquisitions.
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In China, UPS, TNT, FedEx and DHL have chosen to cooperate with domestic
logistics companies in order to penetrate the sector. FedEx has set up cooperation
with Datian Corporation and UPS has a cooperation agreement with Sinotrans.
Further, DHL and Sinotrans have created a joint venture. The Belgian freight
forwarder ABX Logistics also created a joint venture with Penske Logistics in Brazil in
2007. The resulting company, ABX-Penske Air & Sea is positioned to serve the
growing maturity of Latin American markets and the demand for complementary
logistics expertise.
Asian and Oceanias markets

Looking at forecasts for the year 2030, M&As are predicted to increase in emergent
markets as a way of targeting growth. Larger and financially better-equipped logistic
companies will look for sustainable M&As to acquire. Consolidation of the logistics
markets in emerging countries will be the consequence and is also a natural part of
the process of industry maturation.
In recent years a number of the pioneering joint ventures and other arrangements
have led to acquisitions by major players. The relative interest in Asia and Oceania
targets has grown significantly compared with deals targeting entities in other
regions. The number of cooperation agreements or joint ventures is also likely to
increase, some of which may eventually lead to further M&As. As we already noted,
after Chinas entrance into the WTO and subsequent liberalisation, the market was
fully opened for foreign investors. Multinational logistics service providers responded
by buying out established joint venture partners. FedEx bought the joint venture that
was set up with Datian Corporation for USD 400 million and UPS paid USD 100
million to take over some operations from cooperation agreement partners. Sinotrans
and TNT purchased Huayu Logistics Corporation.
3.2.6 Global vs. Local

In a highly competitive environment, an effective and efficient global supply chain is a
must for automotive manufacturers and their suppliers. The industry landscape is
exposed to a set of critical challenges and trends that are leading, if not accelerating,
the need to fine-tune supply chain strategies and operations even further. The
increasing requirement for real-time information and effective communication across
the supply network are critical for managing and optimising the supply chain on a
flexible basis, while keeping costs under control.
While most global car manufacturers and Tier-1 suppliers are in the process of
addressing these requirements, smaller Tier-2 and Tier-3 auto suppliers have a long
way to go.
The global outsourcing is expected to remain an important element in 2030 but face
greater challenges. Public policy is generally encouraging freer trade. The immediate
attractions are differential wage rates, skill availability and favourable taxation.
Among the challenges are longer transports routes that are harder to manage.
- 20 -
Infrastructure capacity changes in demand, causing bottlenecks. Capabilities and
standards are less consistent. These challenges can drive up inventory costs and
dramatically shift the overall sourcing economics. Global sourcing typically leads to
more frequent switching of source locations. Uninterrupted supply requirements place
greater demands on process standardisation to allow seamless switching. It also puts
more pressure on the speed and accuracy of providing cost information. In turn, this
requires access to dynamic rate tables and transit times from carriers. As auto
makers expand and shift their production facilities, suppliers are expected to follow.
Certain supplier companies have typically opened larger numbers of plants in more
countries over the past decade and a half. The lifespan of these plants is tending to
grow shorter.
The task of moving goods between two points is a part of an overall supply chain
process which has become sophisticated and efficient over the last thirty years; what
began as relatively small operations with comparatively local and simplistic sourcing
has grown to become a vast array of global and regional suppliers serving a smaller
number of regional and increasingly global OEMs that are every bit as demanding as
in any sophisticated industry, and often more demanding than the car manufacturing
business.
For suppliers the industry is characterized by relatively long term relationships in

which the more dynamic OEMs demand the latest technology improvements, as well
as looking to suppliers to take a share of the difficulties in harsh market conditions.
OEMs are looking for a range or attributes in suppliers, but regardless of their
individual methodology they are generally seeking the benefits of economies of scale
at a component or system level including both cost or price advantage and
technology leadership. The demand for cars is growing, stemming in large part from
China, India, and Eastern Europe. Established automotive markets in the United
States, Western Europe, and Japan, however, are flat to declining. This uneven
growth raises implications for the supply chain. For one, OEMs and their Tier-1
suppliers must establish a local presence to benefit from these new growth
opportunities in emerging economies. They must also tap into the local supply base
to take advantage of cost levels and fulfil local content requirements. At the same
time, they must integrate local operations into their global supply chain management
systems and programs. For example, sourcing processes from local suppliers must
be aligned with global quality-assurance guidelines and procedures.
Outsourcing in the automotive industry will continue. Differences in labour costs and
disadvantages in scale and scope are influencing this trend. Outsourcing will create
opportunities for both automotive suppliers and supply chain management providers
to expand their businesses into adjacent areas for example pre-assembly or
management and quality control. To benefit from continued outsourcing, supply chain
management providers must offer flexible, modular solutions because not every
manufacturer will concentrate on the same core capabilities and functions.
The auto industry will continue to source from low-cost countries as manufacturers
and suppliers continue to complement their commodities with more complex products
and services. The lowest price, however, is not everything automakers and
suppliers must look at the total cost of sourcing, including logistics, quality of work,
and management. This approach is referred to as best-cost-country sourcing, and
- 21 -
for supply chain management providers represents another opportunity to
encourage, enable, manage, and optimize sourcing.
- 22 -
3.3 Logistic Information Solutions
3.3.1 Executive summery
IS/IT systems are well established as the most important tool when connecting and
managing information and as a business enabler. It is certain, that ITs importance
will increase to meet future needs especially in the logistic sector.
Supply chains are becoming more complex and difficult to handle since production
and the customers are spread globally, resulting in an increasing demand for
information and technology solutions. Supply Chain Enterprise Systems support
supply chain functions through enabling information, communication and
management technologies, allowing companies to share information and synchronize
transports. As complexity increases, the need for standardisation and harmonisation
increase and standardisation organisations like ODETTE will play an even more
important role in the future.
One of the main problems in the area of supply chain management is the high
degree of empty transport space, creating higher costs and driving negative
environmental impact. Advanced technology and intelligent transport solutions are
initiatives towards solving the problem, where airplanes, shipments and trucks
contain navigation, information and technology systems in a higher degree than
before.
Management systems in trucks have enabled the possibility to track, in real time, the
location of the vehicles, their fuel consumption, messages, driver times, service
intervals and much more. The European commission released already in 2008 an
action plan on Intelligent Transport Systems. It aimed to accelerate and coordinate
the deployment of Intelligent Transport Systems (ITS) in road transport, including
interfaces with other transport modes.
One of the initiatives towards creating a unified intelligent system in Europe is the
EURIDICE project aiming towards transforming the goods in Europe to Intelligent
Cargo. The vision of Intelligent Cargo is that it will be able to connect itself to logistics
service providers, industrial users and authorities to exchange transport-related
information and perform specific services whenever required along the transport
chain. This would create several benefits both for the logistics industry and the
community.
The project faces some resistance since some parties in the supply chain currently
benefit from the complexity that exists when handling the dynamic supply chains.
Shipping agents do business on solving the problems and could risk losing this when
EURIDICE reduces some of the problems. Companies that invested money in the
development of their own systems could also be a challenge to convince since
changing systems requires further investments.
Radio Frequency Identification (RFID) technology offers opportunities for automated

- 23 -
identification of fast-moving objects and offers several advantages since there is no
need for manual scanning. We have JAIF Guidelines for frequencies in Europe, USA
and Japan, but to obtain global operation, more standardization work needs to be
done.
Barcodes are still widely used and the most common code within the automobile
industry is DataMatrix.
Global Positioning Systems (GPS) will be a prerequisite for many of the projects that
are now in the development phase and they will in particular support future demands
for Connectivity
3.3.2 Information Solutions

Most of the parties in logistics (OEMs, LLPs, Transporters, and Authorities) have
today rather sophisticated IT systems;
OEMs Inbound IT solutions are often well developed, but often only based on the
production processes and ordering of components. A future challenge will be to
increase the coverage of the systems between 1st , 2nd and even 3rd tier and between
points of discharge and the assembly lines. This development will be dependent on
the OEMs strategies to outsource which will require sophisticated interface
applications between the LLPs and the OEMs, and for the LLPs it will require major
investments and maintenance/development costs. The cost for the systems is one of
the main drivers for LLPs making mergers and acquisitions. OEMs hesitation to
outsource is often related to the simple fact that they do not want to put all their eggs
in one basket. On the other hand, when appointing several LLPs or transport
companies the costs for connectivity increase severely.
OEMs Outbound IT solutions are based on push-systems with the exception of

almost only Volvo. Few of the OEMs have developed systems that cover the total
process to the dealers since the importers and national sales companies are often
privately owned and have their own distribution process. Few have systems
connected with transport companies or LLPs for purposes other than planning the
deliveries out of the factory yards.
LLPs IT solutions are basically developed out of their own transport related
requirements. The last 10 years they have too often offered OEMs more than they
have been able to deliver in terms of system solutions and connectivity. Regarding
Inbound, there are a few big global actors that have managed to implement totally
integrated systems with the OEMs for the total supply chain. Within Outbound, with a
few exceptions the LLPs systems cover their own needs only. When they have
managed to connect to OEM systems it has almost only been for the transport
planning from the factories.
- 24 -
Commu unities haave severre proble ms with increasing g
congesstions on the roa ads. Almo ost all cities
c havee
develop ped systemms based on o GPS to o pinpoint congestion
c s
and sometimes to recommend sspeed and sugges st
alternative routess. The cong gestions aare often re
elated to an
insufficciently deveeloped infrrastructuree. To optim
mize the use e
of the aavailable in
nfrastructure in a far better way y than
today w will be neccessary. This
T will alsso include
e legislations aimed at increas
sing the
utilization of the transport modes.
m
Authoriities have developedd systems that suit their own needs

n suchh as for cuustoms,
trade statistics etc. Howeve
er, the deve
elopment and
a the use of these systems are a very
costly b
basically because of the huge nnumber of systems th
hat authoriities need to
t use.
New, ccomplex IT T-solutions require re spect whe

en being deeveloped, implementted with
currentt systems. New solu utions and d techniques should be develooped from
m users
point off view and based on real busin ness cases
s to meet the demandds of Conn
nectivity
Real--time inform
mation Visibility.
V
The IS S/IT scope e for the future ca an be

describbed by go oing from any time e, any
place cconnectivityy for anyon
ne we will in the
future hhave connnectivity for anything . We
will the
en see en nabling off new form ms of
commu unication between
b pe
eople and tthings
and between thin ngs themse elves.
Connecctions will multiply in e and

n the future
create an entirelyy new dynaamic netw ork of
networks.
Standaardisation isi vital forr the IS/IT

T efficiency
y, increase e of comm munication, future
integration and the
t ability to utilize the possibbilities in a global pperspective
e for all
levels o
of society and
a industry.
In Eurrope ODE ETTE is the

standardization organisatiion,
formed by the e automottive
industryy for the e automottive
industryy. It sets the
t standa
ards
for e-busine
ess
commu unications, engineerring
data e exchange and logistics
management, which link the
4000 p plus businesses in the
Europe ean motor industry anda
their glo
obal tradin
ng partners
s.
ODETTTE cooperrates with other stan

ndardisation organisa
ations succh as AIAG
G in the
US and
d JAMA in Japan.
- 25 -
3.3.3 Future challenges
Supply chains are becoming more complex and difficult to handle. Different parts and
components are manufactured in different places, resulting in a higher demand for
advanced information systems and technology that enable track and trace through
the whole supply chain. Supply Chain Enterprise Systems support supply chain
functions through enabling information, communication and management
technologies.
The future will demand developments towards more common systems where
companies can share information and synchronize transports in order to reach a
higher degree of efficiency, thereby helping protect their brand and their business
advantage. A higher degree of information sharing could threaten a companys
integrity and brand uniqueness. Tampering and counterfeiting, diversions and parallel
import are now daily threats within nearly all product categories. Companies can
react to such challenges with different authentication applications for their products,
but in order to be able to continuously monitor the entire value chain, a solid supply
chain track and trace system is required. How to get the best use of the money will
be important and the collaboration with other companies will increase. The challenge
will be to give the customers something they do not get from others.
Technology development and new systems that are implemented can increase
efficiency but also bring more complexity into the whole supply chain. More
companies realize that the management of the supply chain is an essential element
of good business and will attain more attention. Many companies currently lag behind
in this area and independent companies need to develop supply chain strategies of
their own.
In order to avoid vulnerability in the supply chain, sharing of information at a higher

degree is required in the future to reduce risk. This gives rise to challenges since
companies that are facing vulnerability issues might want to avoid sharing
information. Systems like ERP (Enterprise Resource Planning) and CPFR
(Collaborate Planning Forecast and Replenishment) allow for supply chain visibility
and information integration and are tools to increase the supply chain efficiency.
Improving information flows is an essential area where there is much to gain in order
to transform the supply chain to a more advanced logistics system. Also new logistics
concepts like Supply Chain Even Management are needed as well as new technical
solutions like cloud systems, apps and Licence Plate etc.
The supply chain is quite often managed through a top-down linear structure. The
OEMs tell their first supplier what they need and they in turn pass on the information.
This results in delays and distortion in communication preventing the supply chain to
function optimally. The problem has been highlighted and discussed within Odette for
some years and it has resulted in a project now running jointly with Odette Sweden
and NAF. The project has studied business impact caused by poor forecast
information quality and analysed potential for improvement. The goal of the project is
to develop and agree on a model for measuring of forecast information quality
including performing measurements in real business environment cases. A final
report with recommendations for improved forecast information quality will be
published at the end of 2011.
- 26 -
IT in supply chains has enabled the gathering, storing, and analysis of
unprecedented amounts of data. It equally facilitates planning at all levels through
data analysis and sharing, which enable planning to occur at the strategic, tactical,
and operational level. Similarly, IT gathers, integrates, and analyses logistical data to
streamline local and global supply chains. Every trading partner in the supply chain
must be working from the same data shared in real time through a common hub.
Sequentially passing information across each link of the supply chain perpetuates
duplication of data, missed information, and time delays.
In a related development, IT orchestrates the flow of demand supply, and cash in

supply chain networks, with equal information flow, material flow and cash flow that
include:
Information flows replace or delay inventory flows whenever possible.

Logistics and cost information aspects of each physical material flow performed
electronically for better reliability and velocity, lower cost, and higher level
customer service.
Electronic cash flows such as secure Electronic Fund Transfer (EFT) free up cash
faster for reinvestment.
One of the main problems in supply chain today is that transports are running half
empty which creates higher costs and generates a higher degree of environmental
impact. These are the key forces for the urgent need of better communication and
information systems that can increase the transport efficiency and avoid empty space
in the various transport modes. This will increase overall profit and reduce carbon
dioxide emissions.
These challenges have resulted in more technology and intelligent transport modes
where airplanes, shipments and trucks contain navigation, information and
technology systems in a higher degree than before.
The navigation systems help to avoid congestions and traffic jams and other
obstacles that can delay delivery.
Cargo with dangerous goods can be detected and reported.
RFID technology improves the ability to plan the routes and availability.
The communication technology enables better information regarding pick up time
and delivery.
ITS
ITS is the integration of information and communications technology with transport
infrastructure, vehicles and users. Sharing important information will allow more
information from transport networks which will contribute to greater safety and less
impact on the environment. Cross-sector and multi-stakeholder cooperation is a
necessity to be able to achieve optimal results. ITS will require multi-stakeholder type
approval due to the system complexity. It includes transportation systems for freight
and persons, which utilize information, communication, sensor, and control
technologies to achieve improved levels of performance.
The ITS focus areas are urban, corridors and hubs. Today we have several systems
- 27 -
within tthese area as like fleett managem
ment and road
r charg
ging system
ms. We als
so have
navigattion, trafficc informatio
on and monnitors syste
ems.
So far ITS has mostly

m been o connecting the pro
n related to oducts, succh as truck ks, used
in transsports. AB Volvos main freight transport interest, trrucks, and its relation n to ITS
develop pment can n basically be expresssed by the e term The Connectted Truck, where
truck mmanufacturrers are on n-line with their prod
ducts to provide efficcient opera ation for
the cu ustomers and a their access tto compre ehensive fleet mannagement related
systemms. The Vo olvo Dyna a Fleet co oncept is a good example off this. It enablese
connecction with the
t fleet, trrucks and drivers. The T system m is leadingg in the market in
fleet annd vehicle management. Truck owners ca an see in real time thhe current location
of theirr vehicles, their
t fuel consumptio
c on, messag ges, driver times, serrvice interv
vals and
much m more.
To be a
able to ach
hieve the Connected
C Cooperatiive Vehicle
e we need:
hicle to Infrrastructure systems

Veh
Veh
hicle to vehhicle systemms and
auto
omated driiving suppo ort system s
An ope en ITS se
ervices pla
atform is a prerequ
uisite for the
t conneected coop
perative
vehicle
e.
In orde er to transfform Europe into a more effic cient and in ntelligent bbusiness centre
c a
project called EU URIDICE has been launched. The projject aims to develop more
Intellige
ent Cargo since the largest parrt of goods still move unsupportted by info ormation
service es along the route, resulting in process s inefficien
ncies, pooor communication
betwee en supply chain ac ctors, and conseque ent higherr social coosts in te erms of
environ nmental immpact, safetty and seccurity risks.
A simila
ar project as EURIDICE is run ning in Swweden headed by Oddette Swed den and
NAF (N Ntverk fr Affrsuttveckling i Frsrjniingskedjan
n). The prroject, callled EIT
- 28 -
(Efficient Integrated Transports) will map the transport processes at selected
suppliers, analyse it and give the suppliers recommendations on how to improve. The
objective is to strengthen the position of suppliers in the transport environment.
The vision of EURIDICE is a scenario where Intelligent Cargo connects itself to

logistics service providers, industrial users and authorities to exchange transport-
related information and perform specific services whenever required along the
transport chain.
This vision would create several benefits for both the logistic industry and the
community:
Enhanced and widespread capability to monitor, trace and safely handle moving
goods at the required level of detail, from full shipments to individual packages or
items.
Increased efficiency of freight transportation networks, by improving
synchronisation between cargo owners, logistic services and control authorities.
Improved sustainability of logistic systems, by reducing their impact on local
communities in terms of traffic congestion and pollution.
This initiative can reduce the amount of empty trucks and is a strategy towards
securing the future logistic infrastructure in Europe. By creating a common system,
logistic companies can communicate and keep better track on the overall movements
of goods in Europe with the objective of reducing the amount of trucks. The system
should make it possible to track every package transported in Europe, making it
easier to fill the empty space that is currently existing.
The goal is defined as:
To build an information services platform centred on the individual cargo item and on
its interaction with the surrounding environment and the user.
Despite availability of key technologies, like RFID, high-speed mobile networks and
Web services the problems with inefficient systems exist. The move to Intelligent
Cargo is seen as a paradigm-shift in the field of Information and Communication
Technology application and aims to further develop the use of technology in the field
of supply chain management.
- 29 -
The EURIDICE project therefore intends to fill the existing gap between technical
feasibility and adoption of ICT service platforms for goods mobility, by coordinating
scientific and technological research in two directions:
1. Technical innovation closing the gaps between existing technologies and

introducing intelligent cargo as a unifying concept. Individual technology
developments and standardisation initiatives aim at removing specific technical
barriers to innovation each represent merely a portion, though important, of the
whole problem of intelligent monitoring and management of moving goods.
EURIDICE intends to integrate state-of-the-art technology into a coherent platform
based on the intelligent cargo vision.
2. Holistic perspective on logistic processes and stakeholders, that considers both

traditional and innovative business models (e.g. 4PL), while looking explicitly at
the cargo communities operating at the local and global levels. The goal is to build
an information service platform simultaneously addressing the logistics, business
and public policy aspects of freight transportation, currently supported by different
unrelated services each conceived for a specific stakeholder like the industry,
operator, authority or a specific area of interest.
We will probably see even more operators within this are in the future.
Intelligent Cargo Vision

By 2020 most of the goods that flow in European freight corridors will be Intelligent
Cargo; self-aware, context aware and connected through a global telecommunication
network to support a wide range of information services for logistic operators.
However, it is expected that there will be some resistance towards this new system.
Some companies have established and based their business on solving complex
problems that EURIDICE now can handle. For example, most shipping agents act
as information intermediaries, performing paper or EDI-based transactions on
behalf of cargo owners and logistics operators. These parties will risk to be
replaced to some degree by the new system. The systems are therefore more
oriented towards the cargo owner and 3PLs.
- 30 -
A second problem is that different companies use different systems and scanners.
In order to create a unified intelligent cargo centre companies need to start using
common systems. Since many companies have invested a vast amount of money
into developing individual data systems, there is some resistance to invest money
in a new, albeit more standardized, system. Standards exist for License Plate and
RFID, but it is up to the automobile industry to use it.
A further problem concerns the need for management systems in the transport
modes. Since the demand for transportation is different depending on the country
and where the logistic market consists of both big companies and individual
carriers, the investment ability will be different.
- 31 -
EURIDICE will use a technology referred to as an EcNod or EURIDICE Compliant
Node. The Node can be uniquely identified and has a reference to an Information
provider where more information can be found when authorized. To reduce
complexity all business objects like cargo, means of transportation, services and
human-operated devices are represented by the abstract concept of a EURIDICE
Compliant Node.
Connecting ecNodes in Intelligent Cargo Network enable:
Self-identification
Thing-to-thing connectivity
Delegation of communication and computational tasks to assisting devices.
- 32 -
RFID
Radio Frequency Identification is evolving as a major technology enabling real-time
tracking of goods and assets
around the world. RFID
technology offers
opportunities for automated
identification of fast-moving
objects. The use of RFID
tags results in better control
of the goods and allows the
tracking and tracing to reach
a more sophisticated level. If
goods should disappear, this
tracking system can inform
where and at what location it
occurred during
transportation. This will just
be possible if we have identification systems which can be used both by the carrier
and the goods owner. The question is addressed in the EIT-project (within Odette
Sweden/NAF). A key connecting the assignment and the colli-no is needed. The
RFID tags are easier to scan compared to the original BAR-codes, since the tag can
be read through materials and at a longer distance. This reduces the manual work
and the need for visible tags.
Disadvantages regarding the technology include its incompatible frequency systems

that can differ between the US, Europe and Japan. Another disadvantage is that the
technology is costlier than original barcodes. The ability to track and trace
companies actions and their goods can also result in reduced privacy and security.
The advantages of RFID are:
The reading of data without direct visual contact, e.g. the reading of
package/container contents without opening them.
Saving time during bulk reading: simultaneous reading of larger quantities on one
load carrier.
Consistent transparency throughout all transport processes, warehouse and store
inventories.
The potential for RFID applications is currently far from being fully utilised although
JAIF (Japan Atomic Industrial Forum) has published approved standards.
Barcodes
Barcodes are a more traditional tool used to keep track on the goods and to handle
information related to the goods.
In goods receptions and linefeeds you can have

a fixed reader, but in the transport chain there is
a need for manual handling since the reader
needs to come in contact with the actual
- 33 -
barcode. There have been some developments in this area where the launch of the
QR code has solved some of the problems and
limitations endured by the original barcode. QR
codes stands for quick response and consist of a
specific matrix that consist of a two-dimensional
code. Even if a part of the code is missing or
becomes obstructed, the scanning equipment
can still pick up a scan. These scanners can
operate from any angle and have the ability to
scan a second barcode. This comes in handy
when someone has a ticket code or coupon code
that they can pull up on their cell phone.
The number one change with this new coding

system is that the new codes can contain two hundred times more information than
the standard everyday barcode.
Other similar codes are PDF417 and DataMatrix, where DataMatrix is the most
common within the automobile industry.
GPS
Global Positioning Systems (GPS) will be a prerequisite for many of the projects that
are now in the development phase and they will in particular support future demands
for Connectivity, Real-time information and Visibility. The basics of the GPS systems
will be developed to be used within a few years even if there are elements that might
take longer.
GPS and similar satellite navigation systems are a growing market. Although the use
of the GPS signals is free of charge new GPS systems are being developed in
Europe, China and Russia (together with India) to become independent of the US
GPS system. The main reason for this development is of security/military concern.
This will most likely leave us with several future systems whose integrated
communication possibilities will be important for global connectivity and trade.
However, the USA and the EU have announced their

agreement to jointly adopt and provide an improved
design for their respective satellite system signals. These
signals will be implemented in the Galileo and the new
GPS version for civil signals.
The European prospect being the base for satellite

signals is Galileo which is scheduled for implementation
in 2013. In 2025, it is predicted that Galileo will have at
least 3 billion users.
- 34 -
3.4 Packaging
3.4.1 General
Since the cost of transport is increasing due to increasing oil prices the importance of
efficient packaging and transport is more obvious than ever. To make the packaging
as economic as possible it is essential to have a standardized system that fits well
into all means of transportation, i.e. intermodal transportation. Such systems often
exist inside large companies, adapted to their needs. On a larger scale the only fairly
standardized way of transporting goods is the ISO Container which is used globally.
When it comes to the pallets used for transporting the lack of an international
standard causes substantial continuing expense in international trade. Introducing a
single standard is difficult because of the wide variety of needs in the different
companies it would have to satisfy.
The environmental factor of transporting is increasingly important. The efficiency of

the packaging affects the amount of transports needed which in turn will affect the
environment. In addition to that, the material and type of packaging also have an
effect on the environment.
The pallet system is as mentioned not optimal since it is not standardised to fit any
particular logistics system. The sizes of the pallets differ between different industries
and hence it is difficult for a logistics company to fully standardise their system. The
materials of the pallets can differ a lot between metal, plastics and the most common
wood.
Material Pro Con

Heavy, not durable, can contain
Wood Cheap, easy to repair
bacterium, flammable.
Durable, stackable, light, Expensive, hard to repair,
Plastic
washable, foldable flammable
Metal/alloy Durable, washable Expensive, hard to repair, heavy
Aluminium Durable, light, washable Very expensive, hard to repair.
They are all in their own way environmental friendly, the wooden pallet is easy to
manufacture but has low durability which increases the turnover.
Plastic and metal consume more energy to manufacture but are more durable and
hence have a lower turnover. These kinds of pallets are also often stackable which
makes them easier to store and transport. The advantage of plastic pallets is also
that they have a lower weight which makes them cheaper to transport. Metal pallets
on the other hand weigh a lot which leads to more expensive transports. Also worth
noticing is that the metal prices have increased a lot during the past years which
- 35 -
most likely will affect the prices of the pallets as well. Metal and aluminium pallets
have the same advantages except the latter is much lighter, on the other hand it is
also considerably more expensive.
An aspect in logistics that is increasing in popularity is to use reusable packaging;

this trend applies to both pallets and boxes. Because of this trend foldable boxes are
becoming more and more common. They are not as big and bulky as regular boxes
and not as expensive (in the long run) as cardboard boxes.
There is also a combination of boxes and pallets called collapsible bulk containers
which is as large as a pallet but with collapsible walls which also makes them
stackable. The walls on these collapsible bulk containers can also be made
accessible for unloading which increases their efficiency.
Integrated RFID tags in the pallet construction are likely to be a viable tracking
solution in the future.
3.4.2 The future

The importance of efficient packaging will continue to increase since when the
packaging is efficient, savings can be made in productivity, product quality, material
handling, transportation and storage.
The standardised ISO-containers are unlikely to change in the foreseeable future

since they are so widespread. There are many different organisations working
towards a standardised system of mainly containers and pallets. Since the
differences presently are rather widespread and expensive to change, a fully
standardised system is not to expect in the next 10-15 years.
Wood will in most cases be replaced by metal and plastic in the future. Also the mix of
metal and plastic in the same packaging will grow significantly. The VLC wooden
pallet system will decrease and be replaced by pallets with foldable sides and will be
made of combinations of metal and plastic.
We will see an increased focus on the inner packaging solutions due to the increasing
transport distances, increased quality demands due to more complex components and
more sensitive materials.
Specific packaging systems will increase due to higher quality demands, more
sensitive materials and components, more complex parts that are module based and
to an increase in automatic/semiautomatic picking of the components.
Outsourcing of packaging engineering and management by the OEMs will increase

and management optimization systems that give comprehensive balance and track
and trace features will be further developed.
- 36 -
Future packaging engineering requires combined skills within areas such as:
Materials engineering
Mechanics, Physics
Design
Manufacturing engineering & atomization
Ergonomics
Logistics
Environmental engineering
Economy
IS/IT
The environmental focus will also lead to more recyclable solutions which will be a
prerequisite during the coming decade.
- 37 -
3.5 Capacity and Utilisation
A sufficiently developed infrastructure would facilitate a higher utilisation of the existing
capacity. A higher utilisation of the capacity would also result in less congestion.
Many of the transport systems in the world today are currently facing the same
capacity constraints, such as time-consuming paperwork and differences in national
laws. The economic crisis that struck the world in 2008-2009 had a major negative
effect on the whole logistics sector. However, the air- and sea sectors have managed
to recover well and are now back at pre-crisis levels, though road- and rail sectors
have had a tough time recovering.
The logistics sector is now facing a new challenge; when the capacity increase not
only has to be done in a way of improving the efficiency, but also has to take
environmental concerns into consideration. As has been described in previous
reports (Global Perspective, Infrastructure), many countries are now shifting focus
from air- and road transport to sea- and rail, putting pressure on already overstressed
routes. Most of the growing demands for transport will come from non-OECD
countries, where the transport systems sometimes are very underdeveloped.
3.5.2 General
In 2050, the worlds population will be
about 9 billion people, compared with
todays levels of approximately 6 billion.
This, in combination with rising incomes,
will result in a global mobility expanding
strongly through 2050. It is expected that
there will be about 3 to 4 times as much
global passenger mobility in 2050 as in
2000, and 2.5 to 3.5 as much freight
activity, measured in ton-kilometres. Most
of the growth will take place outside the
OECD region.
There are many barriers, both

administrative and technical, reducing the
capacity of the transport system. There
have been some improvements, but the
barriers still cost time, money and energy.
- 38 -
Road
There has been low or zero growth in the road freight transport sector in Russia and
EU after the financial crisis, which results in a weak recovery. However, over the past
10 years, road traffic, in vehicle
kilometres, has increased by 1.5 percent
per year and demand for road space has
also increased. The prediction for the
increase in traffic levels is 1.4 percent
between 2000 and 2025. It is predicted
that the use of cars and LTs will increase
as a transport option for passengers, and
trucks will increase at the cost of rail when
it comes to transport of surface freights.
There are several things that will affect

road passenger and freight capacity. Some of these are:
Speed of vehicles
Distance between vehicles. This will vary depending on stopping distance and
driving habits
Capacity of individual vehicles: passenger and freight. This will be determined by
the mix of vehicles
Some options for increasing passenger and freight road capacity include:
Road widening
Building new roads
Improving traffic management
Increasing the maximum vehicle weight through network improvements
Increasing speed limits (not favoured by most governments)
Encouraging passengers to travel by bus rather than private vehicle
Rail
The demand for rail increased before the financial crisis, and it is still increasing,
although at a slower rate than before. The passenger demand is predicted to
increase by 2.7 percent annually between 2007 and 2014, but there has also been
predictions stating that the growth could be as high as 6-7 percent. Rail freight is
predicted to grow at 2 percent annually between 2005 and 2014, and then at 1
percent per year between 2014 and 2030.
It is clear that rail capacity needs to be increased, both in order to meet current
demands, but also to meet the future demands of rail. The system is already under a
lot of pressure, and without investments this will become a major bottleneck for
development in some countries.
The following factors are some that will affect rail capacity:
Mix of trains
Length/carrying capacity of trains
- 39 -
Weight of trains (both the rolling stock itself, and the maximum weight it can carry)
Direction of train travel
Acceleration and deceleration (brake characteristics)
Stopping protocols of trains
Location and length of crossing loops
Location of signals
Length of sections
Dwell times
Sectional running times
Quality of maintenance
Functionality of pedestrian areas in railway stations (passenger)
Capacity of freight terminals
Different regulations in the EU regarding the number of tail lights on trains
The DfT Delivering a Sustainable Railway, identify a number of methods for

increasing capacity:
Increasing service frequency

Platform-lengthening, power-supply upgrades and increasing depot capacity
Enhance infrastructure to improve both frequency and capacity. For example:
- Radio-based signalling
- Major station redevelopment
- Higher-capacity trains
- Elimination of pinch-points on lines
- Provision of diversionary routes
-
Simplify service patterns. For example, thinning out stopping train services
Make step-changes in infrastructure. For example:
- Multi-tracking existing lines

- Upgrading them to take extra-long trains
- Building new lines
Furthermore, Rail Freight RUS suggests that there are nine broad options for
increasing rail freight capacity:
Optimising timetables. For example retiming of existing paths, changes to

stopping patterns and flighting of services
Haulage alternatives. For example using more powerful locomotives (electric
haulage can provide shorter journey times)
Routing alternatives
Train lengthening
Provision of additional and/or longer loops. This allows additional capacity for
traffic of differing speeds on a particular route
Signalling headways
Axle weight increases (hauling more tonnage per wagon)
Capacity generating gauge schemes
Bespoke infrastructure as new lines, doubling track and new electrification.
- 40 -
One way of increasing the
capacity when it comes to
railway transports, is to
design the systems to make it
possible to use the same
types of containers in different
countries. The rearranging of
train-sets and the moving of
goods between different types
of containers takes very much
energy and time, resulting in
less efficiency. For example, it is not possible to use W10 containers in the UK and
the goods arriving have to be reloaded into W9 or W8 containers. To further increase
capacity, a harmonized system for electric currents could be constructed. Today
there are seven types of electric currents in the EU alone, with different voltages and
frequencies, as well as alternating or direct current.
As noted above there has also been a capacity constraint when it comes to the fact
that there are different laws and regulations in the EU. One example of this related to
train traffic is the issue
regarding the number of tail
lights on trains. This has
resulted, on several
occasions, in trains not
being allowed to cross
borders. Changes in EU
laws will bring these
numbers down from 18 to
two, making it easier for
trains to cross borders.
Air Freight
Air cargo represents a large share of the total value of exports, up to 40 percent in
the EU and up to 55 percent worldwide. In EU-27 the trade by air in tonnes has even
surpassed the previous pre-crisis peak. However, it can be noted that the pace of the
recovery is slowing down, with declining external trade in tonnes of goods carried by
air in the USA. The value of imports is a bit lower than that of the exports and in the
EU, the imports have declined after the crisis. However, in USA the import levels are
the same as before the crisis.
The current route network in Europe is still an amalgamation of national routes, which
are based on the product of historical national considerations. The intra-European
flights are about 15 percent less efficient than domestic flights and the route network
is not always well aligned with European traffic. Due to lack of precise, real-time
information, the shortest available routes are underused.
- 41 -
Capacity and efficiency constraints for air transport:
Size of the cargo area in commercial planes

The amount of cargo space needed for fuel, for longer transports, reducing the
space available for cargo
The design of the route network
Increased relative costs of air traffic control
Fragmentation of the European air traffic control system
There are 27 air traffic management systems in the EU today, adding on average 49
kilometres to each journey. In 2008 close to 9 million flights crossed EU airspace,
resulting in a total of 441 million extra kilometres flown.
How to increase the capacity and efficiency for air transport:
Harmonisation of the air traffic management systems

Increase the possibilities for cabotage
Further harmonisation and development of the six principal degrees of freedom
related to aviation
Look into the American air traffic control system to improve the European air
traffic control system
Create a harmonized development of safety regulations and their effective
implementation
New technologies, derived from SESAR, will increase the safety and efficiency of
airport operations
Economic and environmental constraints, together with long lead-times for new
infrastructure, mean that priority should be given to optimising the use of existing
capacities
Sea
Since the financial crisis of 2008, global freight data shows that external trade by sea
in EU-27 and USA is attaining pre-crisis peak levels, measured in tonnes.
Capacity constraints for sea transport in Europe:
The amount of paperwork necessary

The inefficiency of ports
The time efficiency
The maritime transport between Member States of the European Union involves a lot
of documentary checks and physical inspections. This is very time consuming, and
therefore penalises maritime transport, even though it is both cheaper and more
environmentally friendly than many other transport alternatives.
How to increase the capacity for sea transport in Europe:
Introduce the European maritime transport area

Motorways of the sea in the European Union
- 42 -
The European maritime transport
area aims to reduce the numerous
administrative procedures which
apply to goods shipped by sea
between European ports. The general
use of ship tracking systems will
mean that national authorities will be
able to monitor the area to ensure
that it is operating correctly. This area
is necessary to be able to create the
motorways of the sea.
In the figure on the right, the planned

motorways of the sea are illustrated.
These will work as key transport
routes between the members of the
EU.
Ports
Around 90 percent of the European Unions trade with third countries passes through
the ports of Europe, with approximately 3.2 billion tonnes of freight being loaded and
unloaded annually.
Capacity constraints for ports:
The amount of necessary paperwork

A vast number of different berths with
specialized or different types of berth
cranes
Loading and driving lanes for trucks,
with different length and position
Transhipment zones with several
loading tracks under gantry cranes
Loading/discharging tracks, capable of
accommodating an entire train, which
differ in length and position on the
terminal
Storage areas, with different shapes,
technology and static capacity
Check in/out gates or entry points, etc.
Local availability of space, on the inland side as well as on the sea side
Rail and road regional and local network
Quantities of maritime and continental cargo flows
Technical concept of using the superstructure of the terminal
Number of inland and maritime container terminals in the surroundings
- 43 -
How to increase the efficiency and the capacity of ports:
Implement future legislative initiatives which effectively balance the need to

increase investment capacity with respect to environment
Simplify the administrative procedures
Increase the use of information technologies (e-maritime)
Guarantee fair competition between ports
Invest in cargo terminals
Increase the coordination between the loading and the unloading operations of
the vessels and the storage of the containers in the yard
Increase the transfer capacity from ship to the gates for land transportation
Increase the number of dry ports
- 44 -
3.6 Competence and Culture
Companies face challenges in the future due to a challenging business environment
based on a high globalisation and more mixed cultures. It will be easier for people to
change place of work, and the reputation of the company will be of more importance
than it has been before. When the world grows smaller, people from different cultures
come together as well.
Studies made in Sweden and in other developed countries illustrate that there will be
a scarcity of people to fill in for retiring workers. This increases the pressure put on
companies to be an attractive employer, to be able to attract young workers and
making them stay in the company. There is also a challenge related to the knowledge
transfer between the older workers and the new generation workers.
3.6.2 Competence
The reputation of a company will be of more importance in the future, since high-
performance people are attracted by a good reputation. The personal networks will
be of more importance and it makes it possible for employees to find a new
employer, based on the reputation the company has got within the network. In a
survey, 62.5 percent of high performance employees, at all levels, stated that
working their networks was the best way of finding the next desirable position.
One of the main challenges for the business organisations in the future is to find the
right competence. In the developing countries this is due to a reduced supply of
workers on the market, but in general there is a pattern globally that the levels of
educated workers will not be able to meet the growing demands. Another major
challenge businesses and organisations see is the competence transfer between
young and old co-workers, as well as the work of being an attractive employer.
- 45 -
Attracting and finding the right competence
It has become more important for business organisations to attract young employees,
both because of their competence, but also because of the possible future scarcity of
skilled and educated workers. The challenge in most developed countries is based
on the scarcity of workers, due to major retirement in the generation born in the
1940s. However, a study done in Sweden showed that few private companies do
enough to attract the young workers. Only 17 percent of the asked private
businesses stated that they have been taken specific actions to attract young
employees. The same number for public businesses was 50 percent.
- 46 -
FSI (Forskningsgruppen fr Samhlls och Informationsstudier) in Sweden has
conducted a long-term study regarding the values of work, friends, family and spare
time, rating the importance of these factors in a persons life in society. FSI has found
out that the group of workers who are born in the 1970s tend to value work lower
than previous generations. As the figure shows, the importance of work has been
declining for this group since the start of the 1980s. This trend has also been seen in
other developed countries.
However, in the recently produced studies by FSI it has been noticed that there is a
change in how the young workers, born in the late 80s and 90s, value work as a part
of their life. These groups tend to have more traditional values when it comes to work
than what the group of workers born in the 70s has. It should also be noted that the
youngest workers are more willing to work hard and think they have a duty to perform
well in the companies. In return for this, they expect to be able to develop as persons
in the company.
Studies have shown that the factors attracting young workers are:
A business culture with focus on new thinking

An open business culture
A business culture where the older workers are working without prestige to
integrate the new workers into the organisation
A solid responsibility for integrating the new workers in the organisation
A clear stated strategy to encourage young workers to stay
Good knowledge regarding what the younger generation wants in a business
situation
- 47 -
Some factors are more important than others when young workers are grading their
company. However, it has been shown that the importance of different factors differ
when there is a comparison between what the young workers actually think is
important, and what the HR- How important is the following things for young people (16-
managers believe is important. 29 years old) on their place of work?
Percentage of respondents
70
One important aspect to 60
consider when hiring workers 50
from the generation born in the 40 Young empolyes think
30 HR-managers believe
80s and 90s is that they are 20
less willing to give up the 10
possibility to start a family, as 0
Healthy work
Fixed working
To have a wrk
Job security
Flexible
Travel and
Independent
Good carreer
Nice co-
A good boss
the generation born in the 70s
is.
Mobility
One problem, associated with the next generation of workers, is that they are very
mobile. It has been stressed that they are voting with their feet, leaving companies
where they feel they do not fit in.
This has resulted in that it has become more important to connect the values of the
company with the values of the leaders in the organisation, as well as with the values
of the co-workers. If these values do not fit together, it is an inefficient business
culture which results in an inefficient organisation. The new generation of employees
might also resign and leave. However, if they do feel that they share the same values
as the leaders and the company, they will be more willing to work harder without the
initiatives of higher salaries or more benefits.
Cooperation Industry - Institutions

All over the world, schools are offering university and college studies with focus
towards logistics. Private companies are also starting to create schools with focus on
their specific areas of interest. One example of this is Volvogymnasiet in Skvde and
the cooperation of VLC, Chalmers Tekniska Hgskola and Handelshgskolan.
This is an efficient way of encouraging students, and next generation workers, to stay
loyal to one specific company.
- 48 -
Information and Communication
In a study conducted in Sweden it was found that only about one in three
organisations conduct any form of organised competence transfer between older and
younger co-workers.
As the older workers are retiring and leave the company, it is important for the
efficiency of the company to make sure that the knowledge the older worker has is
transferred to the new worker taking his or her place. There are many different ways
of doing this, depending on what kind of business a company is doing, as well as at
which level the workers are working. However, the important thing is not how it is
done, but rather that it is so.
Leadership
As described above, the need to
attract competent employees is
one of the most important things
for a company today. The
leaders role in this cannot be
overseen.
The Swedish study previously

mentioned in this section,
showed that barely 50 percent of
the organisations conduct
activities to identify and develop
potential leaders. Also in this
case, the private organisations
are doing less work than the
public organisations.
- 49 -
Workers born in the 70s rate the importance of work lower than previous generations.
However, that does not mean that this generation is not willing to take on a role as a
leader or a director, the important difference is that when they do take on these roles,
it is not based on a feeling of duty. The people interested in leading positions are so
because they think that they are developing challenges, they might be encouraged
by their own leaders, and they might also think of it as the best option possible for the
moment.
In a study conducted by Kairos Future, many of the next generation workers, born in
the 1970s would be willing to accept a position as manager if some conditions were
fulfilled. These conditions are illustrated in the figure below.
- 50 -
There are differences between the different groups of young workers with ambitions
to become leaders and directors in companies. In the following table these
differences are illustrated based on in which generations they belong.
1975-1984 1985-1994
1. Interesting and meaningful work 1. Be proud of their work
2. Interesting and meaningful
2. Nice co-workers
work
3. Good boss 3. Nice co-workers
4. Be proud of their work 4. Good career possibilities
5. Right to maturity leave 5. Good boss
6. Good career possibilities 6. Good work environment
7. Job security 7. Right to maturity leave
8. Flexible schedule 8. High salary
9. High salary 9. Job security
10. Possibilities to affect the
10. Good work environment
working conditions
3.6.3 Culture
The globalisation of the future markets results in a challenge for business
organisations when it comes to penetrating new markets in new countries with
cultures different from what the organisations are used to. Another challenge will be
to manage the multicultural workforce.
In the future, the business relations will depend on the ability of persons from
different countries to understand each other correctly, in other aspects than just being
able to speak a common language. Subtle differences and nuances in
communicative behaviour might lead to severe misinterpretations.
The people who are inter-culturally skilful are the ones who can:
Speak the local language

Are familiar with the history, politics and economics of the local society
Are interested in developing relationships with the locals
Show respect to the local habits
Express professional satisfaction
Are committed to continuous self-improvement
It is therefore important for business organisations to promote and value these skills,
making it easier for them to do business between different cultures. If the knowledge
of cultural differences, and how to work with them, is used in the right way, this
understanding can be compared to the synergistic management strategy. This would
result in the organisation being able to learn how to combine the best sides of the
different cultures, instead of ignoring them.
- 51 -
It is also important for companies to be willing to open up for the differences in
culture, and closely look into the way of doing business in the different countries.
There might be major differences, such as different laws and codes of conduct, or it
might be small differences, such as the way you hand over a business card or who
sits in which chair in the conference room. As we see China rise on the global
market, some of the cultural changes might be put to a test sooner than we think. For
example, is it important in China to hand over the business card holding the card with
both hands in the upper corners, with the text facing the receiver, while in Sweden
this is not an important aspect of the business meeting.
- 52 -
3.7 Scenario Planning
3.7.1 Executive summery
Scenarios can be used in order to help firms elaborate with different factors that
could affect the business in the future. They can also be used as tools when
companies develop their future strategy.
The scenarios presented below handle various aspects in different ways and have
created different possible futures that could occur. Scenarios for both the logistic
industry and vehicle industry are presented.
Looking at the different scenarios for the logistics industry, some commonalities can
be identified. Changing customer demand, globalisation, the environment and
technological development are factors that can be found in the different scenarios.
Even though the scenarios have several things in common, they have very different
outcomes since even more factors are used in the construction and development of
possible futures. Other factors diversifying the scenarios where for example the oil
price, green laws, aging of develop countries, shift of economic and military power
towards the East.
Consulting firms have also developed scenarios for the vehicle industry with help of
experts in the area. Some of the conclusions stated that the demand for passenger
cars will increase mainly due to growth in emerging markets. The industry will need to
develop product portfolios adjusted after different markets and customer segments
where small cars are a segment predicted to grow. Technology developments were
another area predicted to have a great impact on the future products.
New business models will be developed and Asia is forecasted to become an even
more important market in 2020-2025.
- 53 -
Scenarios for 2020
Different scenarios contain different driving forces depending on what factors are
defined as possible to affect the future. These scenarios can be used as a contrast to
the scenario the company develops for themselves to compare and obtain some
perspective on what macro factors that can be identified and might affect the
companys future. The MIT Center for Transportation and Logistics has developed a
future scenario for 2020 where six driving forces were identified as important
uncertainties that the logistic industry need to evaluate:
1. Aging of developed countries

2. Volatility of oil prices
3. Shift of economic/military power towards the East
4. Tightly aligned trading blocs
5. Green laws-globally
6. Pervasive powerful technologies
The aging populations of the developed countries will affect the future market and the
demand for special solutions in the regard to services and products. This will have an
impact on the supply chains since the workers will need more technology adjusted to
an aging workforce, like dashboard design to suit elderly drivers. Automation is
another area that will increase due to an older workforce.
The volatility of oil prices will affect the freight cost which will have an impact in four
main areas:
Freight costs
- Inventory versus freight trade-offs (e.g., JIT)
- Labour versus freight trade-offs (e.g., offshore manufacturing)
- Ocean vs. Air (e.g., offshore sourcing)
- FOB pricing and on-line free delivery services
Material costs (i.e., oil-based materials)
Production operating costs
Packaging costs paper and glass versus plastics
Both the US and Europes share of world GDP have been declining and China and
Indias growth will have an impact on the future in the sense of:
Future global competition for scarce materials and business opportunities (China
ties to Africa and Middle East)
As China and India produce more engineers and college educated students it is
possible that these countries will be more innovative and competitive
Asia and Western-styled legal system for IP and patent protection are different
The development of the trading blocs is another factor that will affect the future
supply chain in the sense of either tightly aligned trading blocs or more free-flow of
goods. More of heavy trading barriers in and out of the blocs will result in more intra-
continental trading.
- 54 -
Green laws is something that might have an impact on the logistics and supply chain
in 2020 resulting in reverse logistic, green product design and supply network
compliance.
Technology is the last factor identified as possibly having an impact on the supply
chains in the year of 2020. The technology development could increase the
proliferation of virtual communities where the world becomes more flat and where it is
easy to distribute virtual workers. There is also possibility of either a worldwide
internet like today or a more fragmented one, where Germany, China and the Arab
nations would create their own. Other uncertainties are the possibility of full supply
chain visibility of goods, assets and inventories and where the virtual reality allows for
full view of the total supply chains resulting in a merging of the physical and artificial
world.
Scenario 1 Synchronicity
Globalisation and democratisation

Trustworthiness and integrity are crucial values in business
Constantly shifting demands and technological breakthroughs
Frenetic pace of innovation and customisation
Critical role of knowledgeable workers
Scenario 2 Spin City
Interventionist policies of governments

Complex web of conflicting regulations
No international consensus
Globalisation remains strong but highly regulated
Trustworthiness is a competitive advantage to compete globally
Scenario 3 Alien Nation
People think and act locally

Mistrust and security are highly sensitive issues
Globalisation restrains by nationalistic policies
Trade barriers and national champions
Secured energy resources
Limited migration flows
- 55 -
These scenarios where developed with the underlying factors previously described.
The Supply Management Institute has together with the European Business School
developed scenarios for 2025 together with experts at the conference Cities of
Tomorrow. Different projections were discussed in order to define the key factors
that could have an impact and shape the future of logistics. In the first step several
factors that could have an impact on the future were proposed to top experts within
the logistics industry. The factors classified as possible to occur were formed into
clusters and then used in in-depth analyses to identify key challenges. Based on the
five challenges described in the figure below, eight scenarios were developed with a
focus on the global competition, energy supply and resources versus labour supply.
- 56 -
Based on the results, eight extreme scenarios where developed where different
factors played an important role in shaping the future of 2025. The scenarios where
the following:
One scenario that was further discussed and that might be interesting to examine is
the second scenario Factory Cities and Fusion Reactors. This scenario stresses the
development of megacities after 2020 that will generate a surge in demand for
logistics solutions and was defined as a major challenge. Two-thirds of these cities
are located in emerging countries and are predicted to produce 50 percent of the
individual countries GDP. Many of these cities will hold 20 million inhabitants and
cities like Lagos, Delhi, Bombay and Mexico City already contains more than 20
million inhabitants. Standstills in traffic are already a problem and deliveries are many
times delayed.
Another perspective used in this case and scenario development is a concept called
Wildcards; future events or developments with low probability but which could have a
substantial impact in the scenario objective and on an industry, company or product.
This concept is often neglected in scenario developments.
The chosen wildcards for Logistics 2025 were the following:
Personal Fabricators
Return of protectionism
Terrorist attack on logistic network
- 57 -
Dictatorship of data protection
Worldwide system failure
Revolutionary transport technologies
Spread of a Pandemic through logistic network
Fully automatic, self-monitoring logistic
The wildcards could be used in a next step to critically analyse and evaluate what
factors could affect a firms business in the longer term and how the firm can prepare
themselves and handle different outcomes. Wildcards are similar to Black Swan
Events, described in great detail in the 2007 book The Black Swan: The impact of the
highly improbable by Nassim Nicholas Taleb.
Scenarios for passenger car markets - 2020

The Boston Consulting Group has developed scenarios for the passenger car market
through 2020. The first step
was to identify the key forces
that might shape the future in
the industry and then assess
their probable strength, impact
and mutual interaction. The
final step envisioned three
ways the market could evolve.
The market development in the

vehicle industry will be shaped
by many stakeholders and the
automotive OEMs are not the
only ones whose actions will
play a crucial role. Other
stakeholder like urban
planners, the energy industry,
legislators, providers of mass
transportation systems, green
activists and non-governmental
organisations are other actors
that will need to been taken into
account. The six forces
described in the table on the
right are uncertainties identified
that, depending on their pace
and direction of development,
can shape the future in different
ways.
Out of these, two main factors were classified with a high probability of affecting the
future and were used in the development of the scenarios:
Growth in the emerging markets

Environmental impact
- 58 -
The growth in the emerging markets In a number of emerging markets, rapid
overall growth masks stark internal disparities in growth patterns. In China, for
example, the top five provinces accounted for 42 percent of the countrys GDP in
2007. If this pattern remains, the demand and spending power will be located in the
bigger cities in the year of 2020 and will at that time reflect the buying behaviour
currently existing in the developed countries.
If the growing patterns in the emergent markets instead would become more broad-
based they could generate a different outcome. Regionally dispersed economic
activity would lead to new economic centres among Tier-2 and Tier-3 cities and
strong consumption and wealth expansion at all levels of the income pyramid. The
emerging markets will have an impact on the future demand for passenger cars and
the different segments of costumers will shape the products portfolio of automotive
producers.
Environmental impact and actions Global warming is another issue that is

forecast to shape the future in the vehicle industry. Road transportation is evaluated
to account for 15 percent of total carbon dioxide emissions and is one of the largest
polluters. Governments have enforced restrictions on carbon emissions in order to
reduce the pollution. Japan has the objective of becoming the country with the lowest
average fleet-wide greenhouse emissions from new passenger cars with less than
125 grams of carbon dioxide per kilometre. Even in emerging markets awareness
concerning global warming has increased and the situation is a larger part of the
agenda today. In China and India fiscal incentives have encouraged the production
and sale of smaller-engine cars that are fuel efficient, with lower emissions. This
development could result in new tough regulations and restrictions in these markets
that will affect the industry as a whole.
On the other hand, short-term economic goals in RDEs could over-shade the long-
term environmental concerns allowing industrial lobbyists to continue blocking
decisive regulatory actions. The second alternative future would put less pressure on
the industry to develop more efficient cars and probably result in less taxes and
restrictions regarding emissions.
In 2007, the RDEs markets accounted for 27 percent of the global sales and
represented 15 million units
In 2020, sales in RDEs are expected to account for as much as 40 to 47 percent
of the global sales where sales of small cars will account for much of the sales
The Boston Consulting Group created three scenarios based on the two main factors
previously described. The amount of smaller or larger cars sold could vary between
different markets and depend on which scenario that is realized.
The three scenarios developed where the following:
Green Freeway
Temporary Utopia
Stranded Masses
- 59 -
Green Freeway This scenario represents a future where income is more equally
distributed and where more people can afford a car. In this case, demand for
passenger cars reach 86 million in 2020 and emerging markets account for 40 million
units. If this scenario occurs, consumers are expected to generate a higher level of
environmental awareness. Increasing concerns of air pollution, oil prices, growing
health concerns and other factors related to the environment will spur the demand for
green products. Politicians have responded to consumer activists and legislators
have established more restrictions in the area of green legislation. These actions will
result in a shift where smaller cars are more coveted than larger cars, even though
consumers can afford them. The emerging markets will, by 2020, account for a
greater share of sales compared to the current situation mainly because there will be
an increase in the demand for small cars in these regions. The sales will even start to
eclipse the sales in Triad markets (North America, Japan and Western Europe).
Temporary Utopia This scenario is similar to the previous one, since economic
growth is being shared among all sectors in the society and is reflecting the success
of strong economic-policy initiatives. In this scenario the environmental movements
remain fragmented and elitist. There is less engagement in the environment and
lobbies have successfully diluted legislation initiatives and prevented some of the
development of green technologies. If this scenario would occur, sales are expected
to reach 86 million units in 2020. Sales in RDEs are expected to exceed the sales in
Triad markets with 5 million units, where small cars once again are the main reason
for increasing sales but with fewer shares of the total sales. In this case 33 million
small cars compared to 38 million units.
Stranded masses In the last scenario described, economic activity has remained
concentrated and population immigration has continued apace. Rapid and haphazard
urban growth has led to more congestion and pollution. Green legislations face little
support and remain ineffective. Large population segments endure difficult living and
working conditions due to the lack of alternatives. The demand for passenger cars in
this scenario is most pessimistic where the market is expected to demand 77 million
units, where small cars only account for 24 million units.
- 60 -
Roland Berger Strategy Consultants have developed scenarios for the automotive
market in 2025. The following conclusions have been presented:
A dramatic shift of production and sales to the Asian markets will take place and,
as a result, 300,000 jobs in Europe will be at risk
Small and low cost cars will gain larger importance
Electric vehicles will account for about 10 percent of new vehicle sales by 2025,
hybrids will reach a 40 percent share
The connectivity of cars will be a key factor in 2025 and beyond
New business models will arise
Successful organisations will undergo structural changes and open up to
partnerships
Five megatrends; geopolitical change, changing demographics, sustainability, the

evolution of mobility as well as changing technology, will cause a huge leap forward
in the development of the automotive industry within the next 15 years.
The demand in Asia supports low-cost cars as an important entry point as well as A/B
segment cars in general. The small car segment will grow in mature markets where
values are changing. With growing population sizes and increasing prosperity, overall
car ownership levels will rise in the period to 2025. Growth in North America and
Europe will not be as high as the global average rate of 1 percent per year, but the
desire for individual mobility in the BRIC markets will continue to grow, accounting for
83 percent of future market growth. In China alone, car ownership is predicted to
grow by 36 percent annually.
At the same time cars will continue to lose their appeal to younger generations.
Starting in developed countries, there will be a radical change in values. For younger
people cars will no longer be as much a status symbol as in the past. In major urban
- 61 -
areas, car ownership will become unnecessary, leading to an increasing trend of de-
motorisation. Mobility eco-systems will provide cars and other mobility sources on
demand.
The cars in question will predominantly be electric, and one in two will have a fully or
partially electrified powertrain. Electric vehicles will account for about 10 percent of
new vehicle sales by 2025, hybrids will reach a 40 percent share and internal
combustion engines will still account for 50 percent. The growing overall share of
electric drivetrains will reshape the current mobility value chain for OEMs and
suppliers, but also for utilities and third parties.
According to the study, many vehicles will be permanently online, sending and
receiving information via the Internet. Connectivity will be the key. Well before 2025,
cars or the customers' mobile devices will be accessing the Web directly for
online navigation services. What younger generations will be looking for in a car is a
seamless integration with other means of mobility together and a hassle-free
connectivity with their mobile. As a result of this trend the automotive industry will
converge with other industries and a cross-industry perspective will be mandatory for
management.
With all these changes taking place in usage patterns and technology, new business
models and value chain partners will emerge, challenging the status quo especially
where they come from sectors other than the automotive industry. Automotive
companies will engage in multiple partnerships as a way of accessing technology and
customers and securing economies of scale. These new business models will not just
be about selling cars but about integrating software and hardware.
Automotive companies will move away from centralized organisations in the pursuit
of size and access to fresh sources of engineers and other specialists. Instead, they
will begin to operate globally and locally, combining global reach with adaptation to
local needs and regulations. Consolidation will continue among suppliers while new
OEMs are likely to emerge from both inside and outside the industry.
As a result Roland Berger identified three scenarios based on the expected

megatrends: Each scenario depicts the world in 2025 in an extreme way.
1. The High-Tech scenario foresees a wide array of car features allowing drivers to
stay connected to their network while driving, use the internet and personalize the
man-machine interface.
2. The Budget scenario describes a world in which the purchasing power of

customers is strongly reduced due to taxes and inflation combined with low
income growth. Cars are less affordable and the money spent on cars is in
competition with other spending.
3. The Sustainability scenario describes a world in which consumer behaviour is

strongly influenced by regulations, legislation and tax, but at the same time by
rating recommendations.
- 62 -

Outlook Report - Supply Chain Management 2020 and Beyond

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O tlo

1 Global 2 Infrrastructurre 3 Supply Chain

Overview of the reports:

Supply chain visibility

3.1.2 Logistics concepts

Build-to-Order / Order-to-Delivery / Demand Chain Management

There are three aspects the company should focus on improving:

Quality The ability to satisfy the customers needs and expectations.

The Best Practices

Consistency on execution, enterprise resource planning (managing data and

3.1.3 Future Challenges

Supply chain visibility

Supply Chain visibility

The intelligent automotive supply chain takes full advantage of increased

Increasing customer demands

The future of logistics providers will be shaped by longer transport distances,

Strategic alliance and mergers/acquisitions (M&As) will be important to obtain

Logistic Providers concepts; 2PL 5PL

Firms with a wide and/or complex distribution network.

3PLs allow companies to gain competitive advantage by:

Allowing firms to focus on developing their core competence.

Risks, limitations and disadvantage of 3PLs:

Loss of control over possibly critical logistic functions.

Three theoretical approaches can be used to explain why companies outsource

Transaction cost Firms outsource to 3PLs to minimise their transaction

The next phase in the evolution of long-term 3PL partnerships is to have

All operational planning must be optimised, inventories reduced and

3.2.5 Mergers and acquisitions

Companies traditionally have pursued

The T&L industry has expanded in the

Asian and Oceanias markets

3.2.6 Global vs. Local

For suppliers the industry is characterized by relatively long term relationships in

Radio Frequency Identification (RFID) technology offers opportunities for automated

3.3.2 Information Solutions

OEMs Outbound IT solutions are based on push-systems with the exception of

Authoriities have developedd systems that suit their own needs

New, ccomplex IT T-solutions require re spect whe

The IS S/IT scope e for the future ca an be

Connecctions will multiply in e and

Standaardisation isi vital forr the IS/IT

In Eurrope ODE ETTE is the

ODETTTE cooperrates with other stan

In order to avoid vulnerability in the supply chain, sharing of information at a higher

In a related development, IT orchestrates the flow of demand supply, and cash in

Information flows replace or delay inventory flows whenever possible.

So far ITS has mostly

hicle to Infrrastructure systems

The vision of EURIDICE is a scenario where Intelligent Cargo connects itself to

The goal is defined as:

1. Technical innovation closing the gaps between existing technologies and

2. Holistic perspective on logistic processes and stakeholders, that considers both

Intelligent Cargo Vision

Connecting ecNodes in Intelligent Cargo Network enable:

Disadvantages regarding the technology include its incompatible frequency systems

The advantages of RFID are:

In goods receptions and linefeeds you can have

The number one change with this new coding

However, the USA and the EU have announced their

The European prospect being the base for satellite

The environmental factor of transporting is increasingly important. The efficiency of

Material Pro Con

Aluminium Durable, light, washable Very expensive, hard to repair.

An aspect in logistics that is increasing in popularity is to use reusable packaging;